Business groups are worried about President Obama’s mid-February announcement that the Department of Labor is working on redefining the term “fiduciary” under the Employee Retirement Income Security Act (ERISA). The new definition, which has been proposed before, will impose a higher standard of investor protection on those who fit the definition.
According to a White House report, “conflicted” advice from either brokers or registered investment advisors costs individuals with a 401(k) and/or Individual Retirement Account (IRA)
$17 billion a year. The goal of the new definition is to ensure investment recommendations are best for the individual investor, not the broker.
Business groups are worried that changing the definition will limit what investment companies can tell pension fund holders and what they can sell to them. “Instead of redefining fiduciary regulation, we should be working to find a balance that protects participants and allows for the free flow of information and services in the market,” says Randy Johnson, a senior vice president at the U.S. Chamber of Commerce.